The Halal Way of Buying a Home - What is this?

“While Muslims agree that riba is prohibited, there is disagreement over what it is. It is often used as an Islamic term for interestcharged on loans, and this belief – that there is a consensus among Muslims that interest is riba – is the basis of a $2 trillion Islamic bankingindustry. However not all scholars equated riba with all forms of interest, and among those who do there is also disagreement over whether it is a major sin and against sharia(Islamic law), or simply discouraged (makruh)”

- Wikipedia definition of Riba

Today I woke up and planned to spend the day riding bikes at Glenmore Reservoir with my daughter after she competed her mandatory Chinese schooling in Chinatown. However, those plans went quickly out the window when 1) I woke up and discovered that she was too sick to attend Chinese school and 2) I went on to Facebook and just happened to see a posting by a fellow realtor about a talk happening later in the afternoon titled, “Free Seminar: Buying your home the Halal way”. As a realtor who also wears the hat of a Cross Cultural consultant (www.xculturalconsulting.com), I was incredibly curious to find out more, and so I set about organizing the rest of my morning and afternoon to attend.

As per the online poster that I downloaded, “Muslims are not allowed to participate in riba/interest; but to buy a house with cash is usually very difficult for the average person…Learn how you can become a homeowner, while still being true to the Islamic faith”. After reading this brief intro, of course, I had a million questions. I will try to explain what all of this is about in this week’s blog post. I will first qualify this blog post by saying that I am not Muslim, nor do I have much of a grasp of the Quran teachings and readings. I decided to attend this seminar to learn more professionally and personally, as I will most definitely meet this community at some point, either as a real estate agent or a cross cultural consultant.

Riba, or referred to as interest, is to be avoided at any cost. Muslims should be adhering to Sharia Law and avoid getting themselves into a financial (or business or trade or consumer or purchase) situation that has he or she paying interest as calculated by a percentage. The Quran contains several passages that state that to be involved in riba is equal to declaring war on Peace Be Upon Him (PBUH) Allah. This is serious. But what is this riba exactly? It is basically the ‘rent’ that is paid on the borrowing of money, and is forbidden in the Islamic faith. Whereas paying rent on a tangible item, such as a house, is acceptable. Profit exists but must be made in an acceptable way, as laid out in the holy Quran. Let’s take the analogy of eating Halal, which is a term that refers to how food is slaughtered and prepared that adheres to Islamic Halal laws. The Jews have a similar concept, that food must be slaughtered and prepared to Kosher laws. In terms of riba, then, we can say that business or trade is conducted, and profit is made, but it is HOW the profit is made that is the issue here with riba and Islamic beliefs. Muslims and Jews might process their food differently, but at the end of the day, they all eat; Similarly, we can say that financial transactions are incited and profits are made, just in a different way than what we are used to in a Judaeo-Christian culture.

The best and easiest way to avoid riba, or avoid paying interest, is to pay cash for consumer goods. For example, one would pay hard cash for a new car or new shoes or a new bike. This makes sense, but how about a house? Houses haven’t been anywhere close to the cost of a car for over 30 years...not easy for someone to pay half a million dollars for a home. So, what does one do in Canada to avoid riba but become a home owner?

I learned today that Muslims in Calgary (and the rest of Canada and the US) can have an option to only being able to pay cash for a house, thanks to a company that has been in existence since about 2008 in North America. Mr. Shoeb M. Sharieff, President of the non-profit organization Ijara Community Development Corp, explained in detail for two hours how this works. Very interesting, to be sure, but if not a bit complicated to the uninitiated ear. For starters, the home purchasing process is almost the same as if dealing with a home buyer working with a standard bank in Canada or an independent mortgage broker. The big difference is that the Muslim buyer who wants to avoid riba and uphold Sharia law in his or her personal life, will either pay cash or obtain pre-approval from a company such as ijarausa.com. This kind of financial institute sets up a trust account that acts as a middle entity to deal with the interest, so relieving the Muslim buyer from entering a financial transaction that involves paying riba. Furthermore, a Muslim family wanting to buy a home and only has $250 000 saved, which won’t buy you much in Calgary, can work with a company like this to leverage borrowing to purchase a home double or triple what they have as cash savings. This is very interesting and worth while news, as many Muslims who want to avoid riba would be limited by what their cash savings amounted to.

Today I gained valuable cultural awareness of a community that exists in Calgary and as a real estate professional obtained the basic understanding of a useful service that I can suggest to a future client, should I come across a Muslim home buyer who is limited by his cash holdings. I am very glad I attended this event today.

Thank you for your time reading this post and if you have further questions or need more information about this blog content, please contact Mr. Sharieff, shoeb@ijaraloans.com or visit their website www.ijaracdc.com.

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Karen Patterson Real Estate, Calgary

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